Key facts
- The S&P 500 and Nasdaq Composite indexes fell to over one-month lows on Tuesday.
- Technology stocks, especially chipmakers, experienced a significant sell-off.
- Concerns over high valuations in the tech sector were amplified by Broadcom's forecast.
- Investors are awaiting inflation data and the upcoming SpaceX IPO.
- A strong jobs report has increased the probability of a Federal Reserve rate hike.
The S&P 500 and Nasdaq Composite indexes fell to over one-month lows on Tuesday, as technology stocks lost momentum. Investors adopted a cautious stance ahead of key economic data releases and a significant initial public offering.
Shares of chipmakers Nvidia, Broadcom, and Micron Technology dropped between 3.5% and 7%, with the Philadelphia SE Semiconductor index falling almost 7% after an initial rise. The S&P 500 tech index shed 4.4%. Technology and AI-linked stocks sold off sharply on Friday after Broadcom's disappointing forecast fueled concerns about high valuations in the sector.
Analysts noted that tech stocks have been a primary driver of the recent market rally and are sensitive to interest rate expectations. Profit-taking in these sectors is occurring amidst increased uncertainty surrounding potential Federal Reserve rate hikes. A stronger-than-expected jobs report on Friday added to concerns that the Federal Reserve will raise interest rates this year, with traders pricing in a 43% chance of a 25 basis point hike in December.
Investors are now awaiting consumer prices data for May, which could offer fresh clues on how the rise in energy prices is impacting inflation. Oil prices tumbled more than 4% after Iran and Israel said they had halted attacks on each other following an appeal from U.S. President Donald Trump.
The Dow Jones Industrial Average fell 0.58%. The impending SpaceX IPO, with its substantial valuation, is also a point of concern for the market, potentially drawing capital away from other high-growth technology stocks.
Advancing issues outnumbered decliners on the NYSE, while declining issues outnumbered advancers on the Nasdaq. The S&P 500 posted 26 new 52-week highs and six new lows, while the Nasdaq Composite recorded 135 new highs and 102 new lows.